R. v. LEUNG CHUN KEUNG

IN THE COURT OF APPEAL

1995, No. 780
(Criminal)

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J U D G M E N T

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Ching, J.A. (delivering the judgment of the Court) :

1. The applicant was convicted after trial of two charges of procuring the making of an entry in a record of a bank by deception contrary to section 18D of the Theft Ordinance, Cap.210. He applies for leave to appeal against conviction.

2. The first charge was particularised as follows:

"Leung Chun-keung '(the applicant)' and Yip Ka-shing, on or about the 28th day of April 1993, in Hong Kong, together with Ip Ka-man, dishonestly with a view to gain for themselves or another, or with intent to cause loss to another, by deception procured the making of an entry in a record of the China State Bank Limited namely a credit entry of $49,975.00 United States of America currency to the account of Pan-Asia (International) Electronic Trading Company Limited, account number 033-662-9-201732-7, with the said bank, by falsely representing to AS Elektronik that Pan-Asia (International) Electronic Trading Company Limited was a subsidiary company of Video Epoch Limited, (a wholly owned subsidiary of Great Wall Electronics Group) and that partial payment for the consignment of 3,000 television sets to AS Elektronik should be made to the said Pan-Asia (International) Electronic Trading Company Limited when in fact the said company was not a subsidiary company of Video Epoch Limited."

The second charge was particularised in the same terms except that the date of the offence was alleged to be on or about 18th June, 1993, and the amount involved was US$165,470.00.

3. The applicant was employed as a sales manager by either Great Wall Electronic International, Ltd., or its wholly owned subsidiary Video Epoch Limited. His area of operations included the sale of television sets to companies in Turkey. One such company was AS Elektronik which was wholly owned by Mr. Huseyin Coruk. It is common ground that AS Elektronik purchased the 3,000 sets of televisions from either Great Wall or Video Epoch and that the sale was handled by the applicant. There were 1,000 sets of a cheaper model and 2,000 of a more expensive one. Payment was to be by letter of credit. However, AS Elektronik wished to pay part of the price in cash. Thus, US$50,000 was paid first. This sum, less bank charges of US$25, was paid into the bank account of Pan-Asia (International) Electronic Trading Company Limited as set out in the first charge. Subsequently, a further sum of US$165,500 was paid. This sum, less US$30 bank charges, was paid into the same account as particularised in the second charge. It was the prosecution's case that these sums were paid in this way because the applicant had directed AS Elektronik to do so, representing that Pan-Asia was a subsidiary of Video Epoch when in fact it was not. It was owned or controlled by Mr. Ip Ka-man. He was a friend of the applicant as was his brother Yip Ka-shing who owned Windsurf Company. Both of these men were originally charged together with the applicant. Yip Ka-shing pleaded guilty to all charges. The charges against Ip Ka-man were dropped.

4. As might be expected, the transaction generated some paper. It began with a fax message from the applicant on the letter headed paper of Video Epoch dated 8th April, 1993. It was addressed to Huseyin Coruk and offered the sets at US$133 and US$135 each. On the next day AS Elektronik replied asking for the availability and payment terms for 1,000 and 2,000 sets at those prices. On 12th April, 1993, AS Elektronik said they would like to place a deposit and to open the letter of credit when the goods were ready for shipping. This drew from the applicant a fax dated 14th April, 1993, saying that the suggestion was workable and asking for a 20% deposit, the balance to be paid by a letter of credit at sight. AS Elektronik replied on 16th April, 1993, saying they would like to place a deposit of US$50,000. This was agreed. By an undated fax AS Elektronik asked for details of the bank account so that the money could be remitted. In reply, the applicant sent a fax dated 21st April, 1993. It contained, inter alia, the details of the order which was 1,000 sets at US$133 and 2,000 sets at US$135. This came to a total of US$403,000. The fax as received by AS Elektronik contained the words,

"Noted with thanks for your deposit USD50,000. Pls make T/T as enclosed information. It is our subsidiary."

The enclosure on a separate sheet bore the name and address of Pan-Asia and gave details of its bank account as set out in the two charges. A copy of this fax was found in the offices of Great Wall or Video Epoch. It was exactly the same except that the words "It is our subsidiary" had been omitted or obliterated. The US$50,000 was sent on 22nd April, 1993. Pan-Asia retained US$24,000 and gave to the applicant a cheque dated 25th June, 1993, made payable to Video Epoch for the sum of HK$200,720 being the then Hong Kong dollar equivalent of US$26,000. This amount went into the account of Video Epoch.

5. On or about 22nd May, 1993, AS Elektronik proposed to pay a further US$165,500 in cash and said so in an undated fax. The money was sent on or about 18th June, 1993, again to the account of Pan-Asia as particularised in the two charges. Pan-Asia drew a cheque dated 27th July, 1993, in favour of Video Epoch in the sum of HK$1,278,487.50 being the then Hong Kong dollar equivalent of US$165,470. It was handed by Pan-Asia to the applicant. The relevant witnesses for the prosecution had no recollection of this cheque and there was no evidence that it was either presented or honoured. A photocopy was found in the applicant's desk. At some time there came into existence two documents on the printed forms of Video Epoch. They were each headed "Order Confirmation" and appear to have been signed by Great Wall but not by AS Elektronik. The first was dated 30th April, 1993, and was for 1,000 sets at a total of US$125,000. The other was dated 1st May, 1993, and was for 2,000 sets at a total of US$254,000. The total amount of the two was therefore US$379,000 which is clearly the US$403,000 less the US$24,000 retained by Pan-Asia out of the remittance of US$50,000. At the date of the two documents the US$165,500 had not yet been remitted. With the two cash payments of US$50,000 and US$165,500, a total of US$215,500, the balance to be paid by AS Elektronik was US$187,500.

6. None of the facts recited above was disputed. Instead, the applicant gave evidence in explanation of what he had done. The first point he made was that Huseyin Coruk and AS Elektronik were evading Turkish customs duty by paying a large amount of the purchase price in cash and then producing to the customs authorities letters of credit for a greatly reduced amount. Notwithstanding that he was warned that he need not answer questions if the answers would incriminate him, Huseyin Coruk admitted that the purpose of the cash payments was to reduce the amount of duty to be paid. It was his uncontradicted evidence that duty in Turkey is levied only upon the amount shown in letters of credit. Building upon this, the applicant claimed that the scheme of AS Elektronik required that there should be false invoices showing a lower price as set out in the letters of credit. Clearly there is truth in this, for it was common ground that the letters of credit required invoices as part of the documentation. The applicant, however, went further. He said that he was concerned that Great Wall, being a public company, should not be seen to be involved in such a scheme. He discussed these matters with a gentleman whose name is variously spelt as "Bari" or "Barry" in the transcript of evidence, an employee of AS Elektronik, because Huseyin Coruk does not speak English. Barry suggested that the applicant should find a local company to deal with the acceptance of the cash deposit and to send invoices to AS Elektronik. Eventually the applicant made arrangements with his friend Ip Ka-man of Pan-Asia for this purpose. Pan-Asia required a fee calculated at US$8.00 per television set. Thus, when the US$50,000 was sent it was sent to Pan-Asia. Since there were to be 3,000 sets Pan-Asia deducted US$24,000 from the sum received and passed on the balance to Video Epoch. When AS Elektronik decided to pay the further amount of US$165,500 in cash it was also sent to Pan-Asia who accounted for the whole amount by way of the cheque dated 27th July, 1993, which the applicant says that he passed on to another member of the staff of Video Epoch. The applicant concedes that he did not seek the approval of his company to these arrangements. He says that they were well within his authority because he was required only to generate a profit of 14% on sales handled by him and the arrangements left his company a profit of more than that even after the deduction of US$8.00 per set. The defence was therefore that AS Elektronik had not been deceived and that the applicant acted without dishonest intent.

7. The first complaint put before us did not directly relate to the events upon which the two convictions were based. It related to the events in relation to charges six to nine, of which the applicant was acquitted. Those charges had to do with a subsequent order of AS Elektronik for further television sets for which they were sent quantities of cement instead. The events took place in October and November, 1993, at which time there was a doubt, on the evidence, as to whether the applicant had been assigned to other duties. The faxes emanating from Video Epoch in relation to the first two charges had all been signed or sent by the applicant. Those for the last seven charges were not. Instead they were sent on the letter headed paper of Pan-Asia and they were signed by someone else even though the faxes sent by AS Elektronik were sent to Video Epoch. In particular there was a fax from Pan-Asia dated 25th October, 1993, which asked AS Elektronik to send the cash deposit to Windsurf Company of which it was said, "It is also our subsidiary" and requested that the deposit was to be sent to a bank account of which it was said, "It is the same bank as before." The Judge below quite rightly took the view that Pan-Asia could only have been acting with the assistance of someone within Video Epoch. However, the Judge below gave the applicant the benefit of the doubt as to whether he had been assigned to other duties at the time and declined to convict on these charges. We are not able to accept counsel's argument that the applicant was found not to have been involved in these matters. The Judge simply found that his involvement had not been proven. Nor can we accept counsel's argument that having regard to the facts of the last seven charges the Judge failed adequately to consider whether or not the applicant had been made the scapegoat for the first two. The applicant's signature appeared on the relevant faxes and he gave extensive evidence as to his involvement. The convictions on the first two charges do not involve a question as to whether or not it was the applicant who performed the acts.

8. The second point addressed was that of deception. The case for the prosecution was that AS Elektronik paid the cash deposits to Pan-Asia only because the fax of 21st April, 1993, asked that that should be done and represented Pan-Asia as being a subsidiary of Video Epoch. The evidence of Huseyin Coruk was clear on that. Complaint is made by the applicant that the Judge ought not to have accepted his evidence on this point for a number of reasons. First, it is pointed out that the Judge found the evidence of Huseyin Coruk unsatisfactory in some other respects. It is sufficient to say that a Judge is entitled to reject part of the evidence of a witness and accept the rest. Secondly it is said that the Judge gave too much credit to Huseyin Coruk for making admissions against interest in relation to the customs duty. That was a matter for the Judge. Thirdly, the evidence of the applicant was that he came to the arrangement with Barry, not Huseyin Coruk. Therefore the latter's evidence on this point was not from his own knowledge and was hearsay. Barry did not give evidence. We are of the view that the Judge was entitled to find that Huseyin Coruk had no knowledge of the arrangement. He was the owner of AS Elektronik and in giving his evidence it was clear that he had been aware of the contents of various faxes even before they were interpreted to him by the Court interpreter. In other words they had been interpreted to him before. The applicant's assertions involve the proposition that, notwithstanding this, Barry chose to come to an arrangement which he did not reveal to Huseyin Coruk. The Judge was perfectly entitled to reject that assertion. It is then said that the applicant's evidence ought to have been accepted. The applicant acted openly. However that may be, not one of the faxes mentions the arrangement or the name of Barry at all. In addition, the fax of 21st April, 1993, specifically described Pan-Asia as a subsidiary of Video Epoch. The applicant's command of the English language is reasonably competent. He explained in his evidence that he had difficulty choosing the right word to put over the meaning that Pan-Asia were assisting without alerting the customs officials. Eventually he had found the word subsidiary "controversial" so he had crossed out the sentence before giving it to his secretary for it to be typed. When it came back to him for signature he signed it without noticing that the sentence had been included. Later when he noticed it he took it back to his secretary for correction. He never saw the document again. She must have tippexed out the sentence on the copy after the original containing it had been sent. These were matters also for the Judge and he cannot be faulted for rejecting this evidence.

9. The final point was that it was not shown that the applicant acted dishonestly. It was asserted that, as a sales manager, he was only required to obtain a profit of 14% and he had exceeded that on this transaction. This is a misreading of the evidence of Mr. Wong Kwok Wing, the managing director of Great Wall. His evidence was that the sales managers were required to obtain a profit of at least 14%. There is nothing in this point. There was ample material for finding that the applicant could not have acted honestly. Apart from the matters discussed in relation to deception there was, inter alia, the fact that the applicant attempted to explain away the fact that a photocopy of the cheque dated 27th July, 1993, was found in his desk by saying that he kept photocopies of all cheques. The fact is that that was the only cheque that was found. The Judge was entitled to accept, as he did, that the photocopy of that cheque had been left by the applicant in his desk to add verisimilitude to his version of the events. Again, although the supposed role of Pan-Asia was merely to receive the money and then to pass it over to Video Epoch after deducting their US$24,000 the two cheques of 25th June, 1993, and 27th July, 1993, were dated a considerable time after AS Elektronik had remitted the two sums. The Judge rejected the applicant's claim that he had continually pressed Ip Ka-man for the money. This may be just a straw in the wind. More importantly, there was a matter which was never explained. Pan-Asia was not only to receive and pass over the money but was also required to send invoices to AS Elektronik. That, of course, was the whole purpose of their involvement. They did not send any invoices. They were therefore paid US$24,000 for doing nothing. Worse still, it was Video Epoch which sent the invoices. AS Elektronik asked that the television sets should be sent to it in a semi-knocked down state to save further duty and nominated three companies as recipients. This was done. Video Epoch then sent three of its own invoices dated 25th May, 1993, one addressed to each of those recipients. The invoices were signed by the applicant and they came to a total of US$187,500. That was the exact sum outstanding after taking into account the two payments of US$50,000 and US$165,500. In the end, therefore, Video Epoch did send invoices at an undervalue without stating on those invoices that a further US$215,500 had been paid. Well might the Judge find that there was no legitimate reason for the involvement of Pan-Asia.

10. It is unnecessary to analyse in detail the route taken by the Judge in arriving at his conclusion. It must be accepted that in a few details he went perhaps further than he should have gone. Looking at the totality of the evidence, however, it cannot be said that his conclusion is in any way wrong. The application for leave to appeal against conviction is therefore dismissed.